Remortgage for Home Improvements: Get a Deal Today

...what a great professional outfit. I decided to remortgage to clear debt and make some home improvements...

Remortgaging benefits?

• Lower Interest Rates
• Improved Cash Flow
• Access to Equity
• Flexible Repayment Terms
• Debt Consolidation
• Upgrade that Property!

How to finance home improvements is often a decision between savings, a personal loan, credit card or remortgaging. With current mortgage rates, is remortgaging a viable way to fund home improvements?

It’s really easy to find out, and you can search the mortgage market free of charge, without any impact on your credit score to find out. The Mortgage Broker will help you understand whether raising funds against your property is the right way to achieve your plans, and if so, get you a remortgage deal today.

What exactly is remortgaging for home improvements?

Remortgaging means moving your borrowing to another lender – and at the same time you can take the opportunity to raise some additional funds for home improvements. This can also be with your same lender as a further advance.

Many people worked from home during lockdown and realised it’s time you had an office, or a new kitchen, a new bathroom or an extension. Raising funds secured against your property is often the perfect way to achieve your plans.

Home improvements are the most popular reason to raise extra funds against a property – and The Mortgage Broker receive lots of enquiries for this reason.

How does remortgage for home improvements work

Remortgaging for home improvements works the same as a normal remortgage process. Speak to an expert adviser for free, The Mortgage Broker will search the market and inform you of your options.

The adviser will need to check affordability, to make sure that it’s possible for you to raise the funds you need to make these home improvements.

A remortgage process consists of checking your credit rating, your financial commitments and the Loan to Value of the property. Loan to value means the percentage that can be borrowed against the value of your home.

The only additional information needed will be details about the planned home improvements – whether you’re planning a two storey extension or just replacing your kitchen cupboards.

Should I remortgaging my house for renovations?

Yes – absolutely. It is common practice to use a remortgage for home improvements. In most cases, not only are you making your property more suitable for you to live in, you’re potentially going to be increasing its value as well.

That’s a win in itself – you’re ultimately increasing your own equity through home improvements.

As an example, you might be looking at replacing your windows. You’re already paying the mortgage, and the additional borrowing might only put your mortgage payments up by an extra £10 a month. Then the new windows increase your EPC energy rating, which in turn increases the property value.

Can I take Equity out of my House for Home Improvements?

This will depend on your Loan to Value and the lenders that we would be looking to approach. Some lenders will happily lend up to 95% of the property value to raise those extra funds for home improvements.

Some lenders aren’t as generous, and will lend up to 85% or 90%. So it all depends how much equity you have, how much you want to take out and the affordability.

Are there any Alternatives to Remortgaging for Home Improvements?

If remortgaging is not possible for your home developments, then yes, there are other options available. You can get a secured loan, which is also known as a second charge loan secured against your property.

A mortgage is known as a 1st charge and if your mortgage rate is fixed at a low interest rate you may not want to touch this. Therefore, you can get a secured loan that sits on top.

Or even if you are unable t0 remortgage as a ‘first charge’ on the property to release extra funds, then there is potentially the option to look at a ‘second charge’.

First and second charge is named like this because of what happens if you stop repaying your mortgage. The ‘first charge’ finance gets repaid first on the sale of your home, and second charge finance is settled with anything left over.

Alternatively, if you’re not happy to secure the funds against your property, you can always look at a personal loan. The interest rates might not be as competitive as the interest on a mortgage, but a loan has its own benefits and flexibilities.

What Factors will be taken into Consideration when Remortgaging for Home Improvements?

The main focus is affordability. The lenders will want to check your credit, your commitments and whether you have any children. They will also want to know what your earnings are and more about how you’re planning to improve your home.

The larger the funds you need, the more detail lender will require. The underwriter will want to see building quotes or architect’s quotes, for example.

How can the mortgage broker help

We can access most of the mortgage market – over 90 lenders – so we can find the right mortgage to fit around each client’s personal situation. We can seek out a generous lender that will lend a little bit more than the others or other lenders that will allow a higher Loan to Value.

If it’s really important to get those monthly payments down, we can look at lenders offering lower interest rates, plus lenders that offer the lowest overall cost mortgages.

Having someone look at all available options is really important when you’re making a big decision. You’ll be equipped with the knowledge you need, and we’re here to help you with the application too. We talk to the lender, the underwriters, the solicitors as needed, and take away as much stress as possible.

We’re here to help you find the most appropriate way to fund the home improvements you’ve set your heart on – so just give us a call.

How does remortgaging work?

The first thing to be aware of is the terms of your existing deal. Some include exit charges and fees, and these could negate the benefits obtained by switching. Many people decide to hold off changing to another deal until their existing one ends. As that date approaches, it is a good idea to start looking at the potential to switch. This can be done with our no-obligation assistance.

The next step is to make sure you can access the largest quantity of available deals on the market. It’s easy to search online for deals from familiar High Street lenders. However, there are many more lesser-known lenders to consider as well. Hence why our advisers can provide you with a far more in-depth selection of available options. They have the experience to dip into the wider marketplace, potentially finding deals you never would have found alone.

When you find a deal you like, your lender will obtain a valuation of your property. This rarely involves entering the property; instead, only a street-based view is typically used, along with other evidence that can be obtained from other sources. This means there is a risk the lender could provide a valuation you believe to be lower than it should be. Watch out for this and don’t be afraid to query it if you’re unsure. The lender should be able to tell you what you need to do to support your case for them to reconsider.

Is remortgaging a good idea?

In some cases, yes, and in other cases, no. The trick is to consider the effect of any fees that would be incurred if you did switch. In some cases, the savings made through switching would far outweigh any fees you may then be obliged to pay.

However, this will vary for everyone. It’s one of the reasons why you should always consider your current deal and compare the pros and cons of that deal to the other deals currently available.

You also need to weigh up the risk of being on a variable rate deal for the foreseeable future, compared with the security of being on a fixed rate deal for two or more years. If you can secure a fixed rate deal while interest rates are low, you could protect yourself against potential rate rises within the next few years. This buys peace of mind alongside the potential for monthly and yearly savings. Quite a potent mixture.

Sometimes, seeking professional advice is the only way to get the full picture. Since our advisers can access far more deals across the whole market, you stand a chance of finding options you would otherwise have missed.

It may also depend on how long you’ve had your loan for. If you took out your existing deal when interest rates were much higher, it would be sensible to find a new fixed rate deal now if doing so meant you could enjoy a much lower interest rate. In this case, the savings could be significant.

What happens when remortgaging?

First, check the conditions of your current deal and see if any costs would be involved in switching. You should also check whether a lender would charge you any costs for moving to them, and if so, how much these amount to. This will give you a much better idea of whether it is even worth switching.

If so, the modern marketplace often allows for an Agreement in Principle to be obtained online for convenience. Also referred to as an AiP, this gives you an opportunity to see in theory if you could get the deal you would like. The good thing about this is that no credit check is required. However, it is possible you could get a yes in theory and then find you’re turned down when you officially apply.

Once you’re ready and you’ve found a mortgage deal you like, you’ll need to apply for it. This is much the same as the process for applying for any home loan that allows you to buy a property to start with. The major difference is that you’ll be asked to provide information about your existing mortgage as well. The remaining steps are much the same as applying for the original loan too.

The amount of time the process takes from start to finish would vary according to the complexity of the case. However, a good rule of thumb is to expect it to be completed within four to eight weeks.

How much can I borrow with a remortgage?

The process of assessing affordability is much like the process you went through when taking out the mortgage you have at present. However, there are some differences.

Firstly, you now have a property that forms part of the equation. The value of the property should be considered, especially as it is likely to have increased in value since you bought it. Secondly, the loan to value ratio (often seen as the LTV ratio) is important. This is the percentage of the loan compared to the value of your home. Not only does this reveal the size of the loan compared to the property, it also reveals the equity currently held in the property.

Loan to value is an important element to think about. The lower the LTV is in your case, the more likely it is you’ll be offered better deals. For example, a 60% LTV is likely to have much better interest rates than a 90% LTV, because you are putting down a lot more as a deposit. The longer you’ve had a loan for, the more chance there is of achieving a lower LTV.

Of course, while your property is worth a lot, you won’t own all of it if you still have a home loan attached to it – only a percentage. This forms part of the picture; your income forms another crucial part. You need to be able to prove you can afford your new repayments if the lender in question agreed to furnish you with your desired loan.

You should also consider how much equity you are going to try and release, if indeed you have reason to do so. Clearing other debts with a home loan offering a much lower interest rate is a good move, but it does mean you’re likely to have a longer mortgage term instead. Either that or you’re going to see higher monthly repayments before you can clear your loan.

How much does remortgaging cost?

A remortgage deal that incurred no costs at all would be a rare thing indeed. It’s best to assume some costs are involved, but the exact nature of them would depend on your situation.

The first charge to be aware of is an Early Repayment Charge or Fee. Also known as a redemption fee, this applies to the mortgage you currently have. It will only be triggered if you leave the product early, before the end of the fixed rate period, for example. The small print for your existing deal should highlight any such fees you would be subjected to. Oftentimes it is best to wait until this period has expired before switching deals. The cost of exiting often outweighs the savings you could make by switching to something with a cheaper interest rate.

There are also potential charges you may encounter that relate to your new mortgage. One of the more common ones is a product fee. There are two ways to pay this. You can either pay it at the start of the term (or just before it begins) or you can add the fee to the amount you are borrowing. The second option may seem tempting but beware – it means you’ll pay interest on that too. This in turn would increase the total amount repaid for that loan. It could skew your figures when looking for the most affordable deal.

All mortgages require a valuation to be conducted by the lender. While this is not comparable to a proper survey (it is often done via an external viewing from the road), it still incurs a fee. You should find out what this is before agreeing.

Are there any fees involved in remortgaging?

Many home loans involve fees. However, when you want to switch from your existing loan to a new one, it is easy to assume any fees will be attached to the new mortgage deal. In fact, you must also consider whether exiting your current deal would incur any further fees.

For example, you may be required to pay an early repayment charge to your existing lender if you remortgage. Your adviser will discuss this with you prior to a decision being made. This will ensure that if this course of action is suitable for you, a penalty charge would be avoided wherever possible.

If a penalty does need to be paid to leave your current deal and switch to a new one, the adviser will ensure you are aware of the effects of this, not to mention the cost. In many cases penalties can be avoided, but if not, the reasons for changing deals should be strong enough to make this move a good financial decision.

In cases where people discover there would be a fee involved for switching deals, they tend to wait until the end of the penalty period. At this point, the penalty would disappear, leaving them free to switch without these fees being part of the equation.

That said, even if a deal is advertised as fee free, you should look at the potential for other costs to appear. Legal fees may be payable for example. A proper comparison will allow you to look at different deals on a like for like basis.

How can I work out how much I can borrow?

Start by getting a rough idea of the value of your property. You can often find this information online, but you could also ask a local estate agent to give you an idea. You should also check the current amount left on your mortgage. Subtract the second figure from the first and you’ll get a rough idea of the amount of equity you have in your home at present.

You also need to consider two other important elements – your income and your monthly outgoings. Any lender is going to need that same information to help them decide whether to accept you for remortgaging. You need to know what your current repayments are each month, what they might be on the standard variable rate for that lender, and what you may be able to pay with a new deal. Yes, there are potential savings to be had, but you must be able to confirm you can afford the monthly payments.

If you alone are responsible for paying the mortgage, you can only use your own income as a guide. If you have a joint loan, you can use both sources of income to aid you in working out the possibilities. It’s important to note that your basic income and any guaranteed bonuses or overtime can be included. However, if you occasionally get bonuses you cannot rely on, these are often unable to be included in the calculations.

Contact The Mortgage Broker Limited for more information today

We provide first-class services for both residential purchases and remortgages. Most UK lenders are competing for your business, which can make things daunting for you. However, you can be sure we will source the right deal for you from thousands of schemes offered by lenders, banks, and building societies.

All our professional advisers are equipped with the latest technology, allowing instant access to the latest deals and offers from our whole of market panel of providers. Our quotes and illustrations are provided without obligation, so you have nothing to lose in contacting us to find out what we can offer.

If your payments are going to increase, and even if the deal your lender is offering you seems attractive, why not get a free no obligation quote from us to make sure you are indeed getting the most suitable deal? There could be an enormous potential saving to be made compared to your existing deal. With the complete application process being processed and handled by our team, requiring very little effort from your side, you really should investigate.